In recent years, there has been an increasing international focus on conflict minerals emanating from mining operations in the Democratic Republic of the Congo (DRC) and adjoining countries.

Armed groups engaged in mining operations in this region are believed to subject workers and indigenous people to serious human rights abuses and are using proceeds from the sale of conflict minerals to finance regional conflicts.

The SEC estimates that approximately 6,000 issuers will be directly impacted by the rule.

In July 2010, in response to these concerns, the United States Congress enacted legislation that requires certain public companies to provide disclosures about the use of specified conflict minerals emanating from the DRC and nine adjoining countries, also called covered countries.

Section 1502 of the Dodd–Frank Act requires companies using conflict minerals in their products to disclose the source of such minerals. The law is aimed at dissuading companies from continuing to engage in trade that supports regional conflicts.

On 22 August 2012, after much public comment and a year and a half after issuance of its proposed rule, the US Securities and Exchange Commission (SEC) issued a final rule to implement the new disclosure requirements required by Dodd–Frank.

Who is affected? What are the expected costs?

Section 1502 is applicable to all SEC issuers (including foreign issuers) that manufacture or contract to manufacture products where conflict minerals are necessary to the functionality or production of the product.

The industries most likely to be affected include:

Electronics and communications

Aerospace

Automotive

Jewelry

Industrial products

The SEC estimates that approximately 6,000 issuers will be directly impacted by the rule and that many private companies in the supply chains of these issuers will be impacted indirectly.

The SEC has stated that it expects that the costs will be substantial to both issuers and non-issuer suppliers, and estimates the initial cost of compliance to be between US$3 billion and US$4 billion, with annual costs thereafter of between US$207 million and US$609 million.

What are conflict minerals?

Dodd–Frank Section 1502 defines conflict minerals as cassiterite, columbite-tantalite, gold and wolframite, as well as their derivatives and defines the affected countries or covered countries as:

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